DAX Trading Strategy
How To Trade The German DAX
The German DAX is a difficult market to trade because it moves very quickly and is highly volatile. These conditions often attract traders hoping to beat the market and most fail. The best way to succeed in trading is to have a good strategy, a good mentality and a good trading plan. You can learn how to write a good trading plan, you must learn how to maintain a good mentality, but I can share a good strategy with you.
This is our DTI strategy and DTI means Dax Trader Intraday. Our DAX trading strategy is a trend-following, momentum-based strategy for short-term DAX traders, which also works for indices as well, like FTSE, DOW and S&P500.
How To Use The DAX Trading Strategy
DAX Trading Strategy Checklist
- Watch the tutorial video series above
- Download a trial version of Sierra charts
- Open up a two-minute chart
- Use the coloured backgrounds as the bias to help you trade in that direction. (Red is a bearish market and Green is a bullish market)
- If the candle turns green whilst the background is green – buy
- If the candle turns dark blue whilst the background is red – sell
- The dots are the ‘supertrend’ indicator and they are showing us where to put the stop loss for a trade
- Do not trade if you see a recent yellow candle because this suggests that the price action is stretched too far
- Set your profit target at 4:1 reward – depending on wherever the stop loss goes
- Close your trade before the end of the session, don’t hold trades over a weekend
DAX Trading Strategy Examples
DTI DAX Trading Strategy
Notice how we were trading up above the deviation high (that’s the upper band), before retracing back to VWAP (Volume Weighted Average Price – that’s the middle line inside the band). At this point the DTI algorithm produced a sell signal.
For shorts, you look for the candles to turn dark blue, whilst the chart background colour is red.
Long Setup – Exited Early
In this example, you can see how price tagged the deviation low early on, but the market rejected lower prices. The background chart colour is green, suggesting to look for longs. Once you see green candles, you have a buy setup.
So in this case, we take a long with a stop loss underneath the supertrend dots and then calculate the target to provide 4:1 reward.
Normally, a trade will be kept open until either it hits the stop loss or it hits the target. However, you may choose to tighten up your trades when you see the yellow candles. These are formed when price closes above or below the deviation bands. It suggests that price is extended and has a high probability of pulling back/bouncing.
When this happens, you can exit the trade once price closes below the supertrend dot.
How To Get the most out of The DAX TRADING Strategy
Work / Life Balance
Never be a slave to working. Always set aside leisure time to do the things that you love. You need be doing what you enjoy. In trading this means setting out specific times that trade and specific times where you can walk away, go out for a run, do something else. This strategy works best between 8-11am UK time and 1-4pm UK time.
Basic psychology teaches us that we have a basic human instinct to survive. Well, in the financial markets, that need to survive generally comes in form of following the herd. Following the trend. We can not move the market on our own, because we do not have the capital. So instead, we position ourselves to ride the momentum.
High Reward vs Risk
In these situations you must have a strong understanding of win rates vs reward:risk ratios. Because if you are aiming for 4:1 reward you will get a LOT of stop losses. And this is normal. For every five trades, four of them can be losers, which is 80%. Our ideal win rate for this strategy is 25% and higher to cover the commission and spread costs